ARTICLE | June 05, 2023
Authored by RSM US LLP
Faced with labor shortages and an unsteady economy, more organizations that used to perform internal audit functions in-house are turning to outsourcing. However, knowing whether outsourcing an internal audit is right for your company requires thorough and thoughtful analysis. In this article, we answer a handful of the questions we most often hear from our clients to help with your deliberation.
Q: Why should we consider outsourcing our internal audit function?
A: There are a variety of reasons organizations outsource their internal audit functions, from cutting costs to labor shortages. We’ll delve deeper into other reasons throughout, but one primary motivation for outsourcing is the internal audit function’s purpose at the organization has evolved and its value has grown.
Traditionally, internal audit has been focused on compliance. But now companies are using it to help with strategy and growth. Instead of looking backward, they’re using the internal audit to look forward—as a windshield rather than a rearview mirror. It’s a valuable approach that requires experienced auditors; the kind of professionals an outsourcing provider already has on its team.
of middle market business leaders say they’ve faced hiring challenges in the past year.
Q: Shouldn’t we hire our own auditors and have them on staff?
A: Some companies have full-time teams handling their internal audit functions, but it’s become harder to hire and retain those employees. Skilled talent is at a premium right now and hiring those experienced candidates is expensive. You’re also competing against organizations of all sizes, which can pose a real challenge for middle market companies.
By outsourcing your internal audit function, you can eliminate the need to search, locate, interview, hire and retain those employees. And you don’t have to concern yourself with all the additional staffing expenses like training, insurance, or benefits. With an outsourced provider, you start on day one with a full team of professionals whose combined experience offers a breadth and depth of knowledge very difficult to assemble otherwise.
According to RSM’s “What’s driving the middle market talent gap?” report:
of survey respondents found hiring to be “very” or “extremely” challenging.
of middle market businesses are struggling to attract experienced talent.
of respondents say their companies rely on outsourcing and managed services to fill the talent gap.
Q: Doesn’t outsourcing complicate the process and communication?
A: On the contrary, outsourcing your internal audit should simplify and strengthen the process. An experienced outsourcing provider can meet all your needs, regardless of the challenges that arise. A skilled firm will have a broad range of advisors at the ready in any field—from cyber to supply chain—so you don’t have to hire more people in-house or outsource to multiple vendors.
An experienced provider like RSM employs thousands of internal audit professionals around the world who already have experience communicating with senior managers, external auditors, an audit committee, and a board. If you have turnover within a small in-house staff, you lose all that institutional knowledge and have to find a way to manage while trying to hire and replace that person. But at an outsourcing provider like RSM, its deep bench of internal audit professionals ensures seamless continuity.
Top three technologies important to future business success, according to Corporate Board Member and RSM research:
Q: How else does an outsourcing provider add value?
A: It isn’t just that an outsourcing firm has more advisors and subject matter experts. An outsourcing provider helps to save time and money when it comes to the extensive training those advisors receive. For example, when you implement new software, your company incurs thousands of hours of training and hundreds of thousands in costs to upskill the in-house team.
However, when you outsource your internal audit function, those outside professionals come to the job already trained and knowledgeable on that new software. Your third-party provider is already utilizing that software with other clients. They aren’t just trained in it; they’re experienced in it.
Another real-world example is when you have a specialty audit. You may have professionals on staff, but a specialty audit can still be outside their comfort zone. Outsourcing allows a trained partner to come in already up-to-speed in IT, privacy, ESG, supply chain, fraud, etc. You once again save the time and expense of training your staff to get them to the level of an outsourced specialist.
Number of RSM risk advisory professionals across the globe
Number of countries in which RSM is currently conducting internal audit services for international clients
Q: Can outsourcing scale with us as we grow?
A: Absolutely. A provider like RSM doesn’t just have thousands of knowledgeable advisors across the United States; they have thousands of advisors around the globe. So as your business grows and enters new global markets, RSM already has resources in those markets ready to calculate risk, maintain compliance, and maximize opportunity.
It’s another subtle yet important added value to outsourcing. Knowing that your provider has a team in place not only softens the landing, but it can also even provide some advanced planning. Using internal audit as a windshield (rather than a rearview mirror), a provider with a global staff like RSM can help evaluate potential markets, identifying opportunities early in the process. They have the ability to focus on best practices across your industry and markets—even if you’re not yet in those specific markets.
RSM’s analysis of internal audit models research indicates that companies spend an average of $500,000 to $650,000 on internal audit services for every $1 billion in annual revenue.
Q: Can we afford to outsource our internal audit?
A: Ten years ago, one could make an effective argument for saving money by staffing and keeping an internal audit function in-house. But not today. Setting aside all the added value that experienced outside advisors contribute—which materially affects the bottom line in its own right, as noted previously—the sheer costs of salaries, staffing, training, and turnover make that argument moot.
An effective internal audit results not just in greater compliance, but in greater productivity and efficiency of your operations. The value of internal audit outsourcing—and more experienced, proficient third-party advisors—is in more than the audit; it’s in the subsequent improvements to your operations.
Putting it all together
An experienced outsourcing provider steps into an audit fully trained and ready to go. Their experience makes them efficient, from a time perspective. Their skill makes them effective, from a value perspective. In today’s labor market, both commodities—efficiency, and effectiveness—are extremely difficult and expensive to acquire and maintain in-house.
So, when you calculate all of the raw costs plus the immense added value of staffing, training, experience, global reach, subject matter expertise, and more, it’s not hard to see how you can afford to outsource your internal audit. In fact, it’s hard to see how you can afford not to.
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This article was written by RSM US LLP and originally appeared on 2023-06-05.
2022 RSM US LLP. All rights reserved.
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